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ComScore’s latest survey for US smartphone users showed that Android had 52% share of about 142 million users. That amounts to 73.84 million Android devices in use.

ComScore’s previous such survey showed that Android had 52.4% of about 141 million users. This amounts to 73.88 million Android devices in use. It also means that Android usage in the US went down for the first time.

The difference is surely within a margin of error so it’s not something to declare definitively, but the pattern of Android “peaking” has been evident for some time.

Even though share stopped growing about a year ago, Android continued to gain users as overall smartphone consumption increased. The last few months however have shown a slowing of new smartphone users and therefore we have this first instance of Android appearing to lose usage.

Note that this has not been the case for iPhone as usage over the last six months is up by 11 million users vs. 6.6 million for Android.

Indeed, iPhone gained more users than Android for the last 6 out of 8 months.

Blackberry is the most interesting story to me at the moment, all the signs are there that they are trying to move to being an agnostic services/software company (but at the moment without openly acknowledging the move) – how many quarters before they exist hardware?

obarthelemy

I’m not sure “interesting” describes it. It used to be schadenfreude thanks to all the ex-BB *sshole zombies, now it’s just sad.
They’ve been out of the game for so long, even BBM and their Entreprise services have become irrelevant. BBM replaced by WhatsApp and consorts (extremely wide multiplatform support), Entreprise (which is still not quite OK on BB10 compared to BB7) outclassed by Apple and Android solutions.

The emperor has no clothes.

Tatil_S

If you are after secure messaging, there is http://threema.ch/en/ . It is based outside the US, uses end to end encryption and it works on both iOS and Android. The service can be disrupted by bringing down its servers, but messages cannot be intercepted. You need to be face to face (well, phone to phone) with your contact for the first time setup if you want to make sure you are safe from man in the middle attacks though.

peter

I have been wondering about the ‘longevity’ of low-end Android devices.

What I mean is that a cheap phone 1) costs fairly little to the user, 2) may be somewhat under-powered, 3) may not upgrade to recent versions of Android and 4) may be built with cheaper materials. If you add all of those elements up, there is good case to be made for moving to a new phone after 24 months (at the end of the contract) because the phone is literally at the end of its life (and may not have been a joy to use for a while).

On the other hand, a high-end Android phone might still be an attractive device past the end of the contract for the original owner or as a hand-me-down to the kids/spouse/parents.

If my logic holds then that would suggest that the churn rate of low-end phones will be noticeably higher than for high-end phones and their share of the installed base will be lower than their share of unit sales suggests.

All of this is a long way of saying that sales of low-end devices may have a disproportionately small contribution to the strength of their platform; particularly if the user experience is relatively poor towards the end of the contract.

obarthelemy

I’m not sure. Looking around me,

– high-end phones are mostly bought by tech-oriented people, who will enjoy upgrading asap
– low-end phones on the contrary are mostly bought by “don’t-cares” (rather than the budget-constricted), and those… don’t care about upgrades. As long as they get their mail and a handful of pet apps, they’re happy. Usually they also want small phones, and high-end small phones have been a sore point for Android for a while.

I haven’t seen cheap Android phones be less durable than premium phones physically, and renewal for convenience seems slower than with high-end models. Also, since the resale market for Android phones is very lively, resale is more frequent than hand-me-downs on the high end.

That’s all very anecdotal though.

http://www.noisetech-software.com/Home.html Steven Noyes

The main point stands I think. A GSIII is more likely to find a new home after the original owner moves to a new phone when compared to a Casio GzOne Commando. Button life, battery life, touch degradation and screen life would greatly limit the Casio’s overall effective lifespan compared othe GSIII.

Apppli

True, the churn rate of low end devices will be higher – but it shouldn’t effect the absolute market share of Android, assuming that they upgrade to another (highend) Android phone.

The Android number is a little higher than I might have imagined actually

handleym

I think it’s worth noting that STILL, in 2013, we have the following situation: the newest mobile service in the US, the just launched TextNow, demands that you use one of their two aged Android phones. (Nexus S or Galaxy S II).

The obvious question, then, is why? WTF do they care what phone you use? Why are they even in the phone selling and distribution game rather than just the minutes and data game?

The charitable answer is that they are using Sprint’s network, so they can’t just send SIMs to new members. But obviously recent iPhones (and I assume high end Android phones) are CDMA capable.

Which makes one suspect that the REAL issue here is precisely the one Horace frequently alludes to. People using the phones TextNow offers will not want to use up too much data because the experience is unpleasant, whereas people bringing an iPhone to the party might, god forbid, actually WANT to use all the data they have paid for each month…

(Yeah yeah yeah, TextNow claim they will offer a bring-you-own-device option in the future. Let’s see when that happens.)

templewolf

That’s a pretty big assumption because your prospective user is moving from an Android only low end market to an IOS dominated highend market.

Walt French

Think in terms of what kind of movie “opens wide” in thousands of theaters, and is gone in weeks, versus one that doesn’t have the obvious appeal of a clichéd genre, but can build an audience thru refining the marketing and word-of-mouth.

Verizon badly needed a smartphone line in 2007–2009, and the stories in Wired (I think Googling Wired Fred Vogelstein smartphones would work fine) spelled out pretty clearly how they took over key parts of marketing to regain their image of being the top US wireless provider.

Early US smartphone history cannot be understood without Verizon’s role in pushing Android out of Google’s original mail-order, Nexus-style offering. Somebody who knows the details better can verify, but I’ll wager they did, and paid for, more than 80% of all the Android ads, even net of co-op share from the OEMs.

Verizon still needs Droid® phones—they just announced 3 phones just ahead of the carrier-unbranded Moto-X—but has enough options that they can settle back into money-making, versus market-share-protection, mode. They probably give relatively little attention to the concern that Apple gets such a dominant share that Cupertino can dictate terms to the carriers, turning them into dumb pipes. The Gini coefficient likely shows quite a bit more concentration than the old days when the carriers could keep OEMs barefoot and pregnant, but it’s not gawdawful. Apple may be a threat, but Google has pretty naked, unlimited ambition to compete in or utterly destroy the profitability of some very important businesses, e.g., the very wired network business.

Walt French

Heh, that took a strange turn! But go back to the math: even the very low-end smartphones in the US still need a data plan, resulting in most of the money going to the carrier. The majors don’t actually offer a “low end” smartphone-cum-plan so low-cost phones merely make it harder to get good value out of all those expensive radio connections/packets.

People need to stop writing articles whose premise is based on statistically insignificant variations. Margin of error, margin of error, margin error!

SubstrateUndertow

Based on your screen image shouldn’t you have repeated that three more times?

handleym

It’s only “insignificant” if you think crossing zero is some sort of magically important value.

What strikes ME as important is the very obvious (for multiple quarters now) plateau for Android in “Share of US Smartphones”. By that measure, the point of today’s announcement is not that the latest value may or may not represent an absolute decrease in numbers, it’s that it very clearly represents a continuation of the trend — the plateau remains there and is not moving.

templewolf

Horace is not misrepresenting the data or hiding the statistical relevance of the findings like many authors do. His point is not that Android is loosing users, its that Android is plateauing in America. Which would still be true regardless of the margin of error.

Based on your casualty/causation rants, I am surprised you linked to that article given the authors conclusions.

obarthelemy

Well, he does make a good-faith effort at it,
– gets data from several countries with differing backgrounds
– checks for other possibly significant factors (phone desirability and purchasing power)

You’re never 100% sure until you can do experiments, and even then… I do think he’s isolated the most probable variables, proven which is the most significant one by far, and we know the causation cannot possibly be working the other way.

What are your specific issues with his methodology or findings, apart from not liking them ?

Walt French

@Olivier, the best I can say about the analysis is that it appears earnest. I’ve made comments there, but tl;dr isbad data ⇒ bad analysis ⇒ unsupportable conclusions.

Several months (?) ago, Horace offered the notion that carriers “hired” the iPhone (via subsidies) to sell their rather expensive data services. While I don’t recall his attempting to make the same sort of international comparisons, it seems much more sensible to believe that you’re wasting your money trying to get good use of 4G data on a low-rez and/or slow phone, just as you’re wasting your money buying a top-of-the-line phone where 2G is gawdawfully slow for anything besides SMS, email and simple websites.

obarthelemy

1- is there evidence of iPhone users using more data than users of high-end Android devices ? I’ve seen aggregate comparisons, but nothing separating high-end and low end. How do you know the iPhone 5 “sells” more data than the GS4 ?

2- What about unlimited plans ? Isn’t the carriers’ interest in this case to push the phone with the lower data consumption ?

Plus in the end, I don’t see your point. The question was not why carriers subsidize phones, but whether subsidies are one of the main explainers for iPhone’s share. Do you have any reason why his analysis is invalid, apart from it not answering the question you want answered ? Or answering the question you don’t want answered ?

handleym

obarthelemy, your constant harping on about subsidies is like people who claim that the Vietnamese won their war because they “cheated”.

The US carrier environment is what it is, and is what is has been over the past 5 years. All Apple has done is take full advantage of that situation.
Apple is perfectly well aware that the US situation is special — Horace has told us about Apple sales in China, and we all know about the cheap iPhone rumors.

So what exactly is your complaint? Apple rode the subsidies horse as hard as they could for as long as they could; now when that game appears to be played out (at least to the point that serious growth will occur outside the US) they already have a replacement strategy in place.

Would you have preferred that they switch to the cheaper strategy three years ago? Why? They’re in the business of maximizing profit, and there is no evidence so far that they’ve mistimed this transition.

obarthelemy

My complaint is that, when purporting to analyze Apple’s iPhone business, not taking into account what seems to be the single most important contributor to Apple’s market share makes any analysis and reasoning pointless. Step 1 in philosophizing about outlooks, iPads, … should be to try and figure out where subsidies are heading.

templewolf

I would have to agree with obarthelemy that subsidies absolutely help Apple. Without Subsidies only the upper middle class would be able to afford the newest generation high-end phones. Apple only sells high-end phones, so this is particularly advantageous to them. The question is how will they reach the large portion of the world who are not able to finance their phone through subsidies. But the more important question is does it make good business sense to try? Please no Steve Jobs quotes.

Space Gorilla

Of course obarthelemy is correct because the unsubsidized iPad was such a colossal failure and didn’t sell very well at all… oh, wait.

obarthelemy

Well it did take 12 quarters for the iPad share to go from 100% to 40%, so I guess you’re partly right.

Space Gorilla

Also for your convenience, iPad sales by fiscal year:

2010: 7.5 million
2011: 32 million
2012: 58 million

With 2013 on track to be a much larger number yet again. There’s no evidence to support any notion that Apple is selling less iPads or less iPhones. They continue to sell more and more. Arguing about basic facts is getting very tiresome, this is not why I come to Asymco. It’s disappointing to see so many trolls here.

obarthelemy

You do know the difference between market share and unit sales ?

Space Gorilla

I’m not a member of the Church of Market Share.

obarthelemy

That’s fair. I’m not complaining about subsidies per se, but about so-called business analyses of Apple not taking that major factor into account, nor even of trying to determine/validate its importance. Especially when there seems to be a switch away from subsidies, even in the US.

My point is that the “interesting” analysis is fatally corrupted and untrustworthy…that it takes an approach totally different from standard purchasing decisions models, with no justification for eliminating what are logically the most important explanatory variables…that what we DO know is that the great majority of Androids sold in the US are notably less expensive than iPhones and that their average usage levels have, at least until recently when the market may have moved upscale, been dramatically lower.

Statistical tests are GREAT ways to confirm that one’s concepts are borne out in practice. They are TERRIBLE ways to prove causality of the correlations, as you have implied that you know, especially when no effort is made to justify why the included variables are either accurate or meaningful, and excluded variables are arbitrarily ignored.

To show the utter inadequacy of the “subsidy-is-all” model that Tech-Thoughts fell back on when his worthless PPP data fell out, consider how you would model brands of automobiles in Spain vs the US. To my knowledge, subsidies are a tiny part of the equations, but there are monstrous differences in nameplates. The 30 most popular US models totaled half of cars sold here thru June and those nameplates were less than 4% of cars sold in Spain. Only one of Spain’s top 30 were in the US’s.

The top US nameplates—various trucks, Camry, Accord, Altima and Ford Fusion (the overlap name)—are hugely more expensive than the Seat Ibiza, VW’s Polo & Golf, Renault’s Mégan and Clio that dominate the Spanish market. These choices are obviously determined by buyers’ incomes, highway-vs-public choices, just as phone purchases are obviously tuned to incomes and network features. Whatever tiny subsidies you can impute to the US rescue of GM—6 of our top 30—or nationalistic emphasis in either country—e.g., SEAT—are obviously dominated by features (size, power) and price (MSRP, fuel).

It’s common sense: buyers try to get the best equipment for their needs and budgets. Subsidies may help us fool ourselves about those costs, but the outcomes are broadly consistent with or without them: in the US, relatively well-off consumers avail themselves of more expensive, more capable and more reliable phones, in contrast to nations such as Germany, where per-capita national product is only 78% of ours, and especially Portugal (less than half). With more constrained budgets, your average consumer buys less expensive devices and orients to less expensive services, such as OTT messaging, rather than the more rich-media and premium services consumed in the US.

This is why you get downvotes when you pretend to be engaging in dialogue. I don’t believe you are so dense as to be unable to understand others’ points, but you consistently act that way.

obarthelemy

Are you trying to convince me, us, that if BMWs were a the same price as Skodas, everyone wouldn’t be choosing BMWs ? Where’s the “common sense” in that ? I thought we had that discussion months ago. But at least you seem to have a good definition of your state of mind…

As for a mistake in his PPP correlation changing his subsidy correlation… I think you’re revolutionizing the field of statistics right there…

So yep, let me get downvoted for having the gall to suggest that, if they were priced the same, everyone would be getting BMWs.

BTW, talking of respect and good manners, you’re always to first one to fire off insults and demeaning terms, Mr “Obtuse”. As for valid arguments.. .sure, Skodas at the price of BMWs….

Within the Euro area for example, at broadly the same GDP, and, from experience, broadly the same network quality, AAPL’s share varies from 35% to 5%. Kinda leads me to believe that GDP and network conditions are not a very good predictor for Apple’s market share…

Walt French

Your data is almost perfectly monotonic in market share on income — with the UK and China a bit higher than you’d expect, and Spain a bit lower.

But I wasn’t claiming that income was all, merely an important part. One would normally look at 3 additional factors: competitive (e.g., Nokia & Android) and complementary (networks) prices; acclimation (durable goods are predominantly purchased after a consumer feels secure at his new income level) and local history/customs.

And of course, I mentioned income distribution at Tech-Talks. For all the recent wealth of urban Chinese, half of the country’s citizenry are still rural poor.

Going back to my original dismissal of the amateurish analysis at Tech-Talks, it puts all its eggs into one basket, a basket that addresses a rather Menckian notion that underestimating consumers’ intelligence (the subsidy fooling us) is all. Neither you, or the hapless author, cite any evidence that somehow phones are unlike virtually every other class of goods that way.

I could hardly dismiss that subsidies matter, and I won’t. It’s quite clear that when iPhones were new, people were unwilling to take a chance on being stuck with a new technology that might be a flash in the pan, and I still talk to feature-phone users who don’t see the benefit of ’em. I’m just saying that the huge majority of smartphone buyers make intelligent buying decisions for their expected usage, for their budget and for their particular needs.

In contrast, you attribute all the differentiation to how the companies — amazingly, including Verizon, who famously dismissed the iPhone and funded Motorola’s first Droid phone — charitably subsidize iPhones so Apple can make all the money. Incredible.

obarthelemy

Indeed, phones are like any other good in that people don’t grok TCO:

1- People may not have a choice, $100/mo over 2 yrs may be the only solution for them if the can’t pay up $700 up front, even if the monthly rent is then only $50. Note: in that case, people overwhelmingly choose subsidized contracts, instead of consumer credit + unsubsidized contract, as far as I can tell, though that would be cheaper.

2- People are extremely bad at calculating TCO. 2 examples: ask anyone with a subsidized contract how much they paid for their phone, their answer will be the upfront cost of it ($100-$200); not the difference between purchase + low monthly rate vs their subsidized contract; not even the total cost of phone+service over the period. Other example: on this very blog people have kept saying that high resale value makes their Apple gizmo a better deal than Samsung stuff, even though resale price minus purchase price shows Samsung stuff losing less value in $$ amount… there’s a tunnel effect on the resale value, another tunnel effect on the initial outlay… TCO gets lost in the background.

3- People get sucked in by “low monthly payments” all the time, and don’t pay enough attention to compound interest (the most powerful force in the universe). In France, they had to *legislate* that all credit offers had to state their “real all-inclusive rate” (%) and “total cost of this credit” (in $$), because customers just overlooked those… Of course, that law doesn’t apply to phone subsidies, because the subsidy and the service part are not segregated.

As for Verizon, they didn’t dismiss the iPhone so much as hastily dream up a competitor since Apple had an ATT exclusive.

As for validating the importance of subsidies to high-end smartphone sales, we did just that in France by quickly moving from mainly-subsidized to mainly-unsubsidized (60:40 to 30:70, over a year). the sub-$200 (150€) smartphone segment simultaneously rose from 15% to 30% of unit sales, and that’s with many still tied up in 2-yr contracts, and/or having a 1 to 2 year old $600 handset that’s probably still a bit better than current $200 handsets, so no reason to “upgrade”. And a dearth of OK phones at that price point (Wiko/Tinno, LG, and now Archos are progressively filling that void). Apple did get a bit of growth in share, but I couldn’t find any info on their ASP (ie 4/4S/5 mix) in France.

All this to say that I stand by my assertion that subsidies A) are a major market driver (more than purchasing power or network quality), and B) overwhelmingly favor Apple (because subsidies favor expensive models, and Apple only have expensive models).

Walt French

@obarthelemy:disqus wrote, “As for Verizon, they didn’t dismiss the iPhone so much as hastily dream up a competitor since Apple had an ATT exclusive.”

Your statement is at direct odds with uncontroverted reported facts.

One of the Wired articles I mentioned reported that Jobs & Co were quickly shown the door when Apple called on them, perhaps (in 2005?) more than a year before Apple committed to AT&T. And a person in the industry who works with Verizon told me that Verizon subsequently fired a half dozen (I’m not recollecting exactly) people who were responsible for that decision.

Wired also reported that Verizon was totally uninterested in Android when Rubin presented the concept to them. That may well have had to do with Google’s mail-order sales model, which utterly flopped with the G1. It was not until the involvement of Motorola’s Jha, who was experienced in carrier relations, that Verizon whipped up the Droid brand name, the “Droid Does” marketing, etc.

By the time Verizon got into the smartphone game, the subsidy model had been established, and Verizon went along with it. But if you were to look just at the 2007–2010 time period, you’d say that carrier backing, not subsidies per se, drove sales in the period.

So Verizon dismissed Apple’s concept and took a leisurely 2 years to develop a competing product. And while it absolutely has to be true that carrier financing can hide TCO and boost upgrades, people need a purpose and budget to buy a product that is a couple percent of the median American’s annual take-home income—twice that for some of Europe.

The backing/subsidies/whatever question is important today within the US. A developer acquaintance has predicted lukewarm sales for the Moto X, in part thanks to its lack of carrier exclusivity and branding. And commenters are rolling their eyes about Google having stripped Moto down to a skeleton staff for its carrier relations, and a history of bumpy logistics. I think we’ll see that features, relative value and carrier backing may end up having a lot more to do with success than a subsidy on a rather expensive phone.

obarthelemy

Reviews of the Moto X are lukewarm, which is par for the course for gadgets not targeted at the reviewers’ own demographics. Very few reviewers (and journos in general) manage to get out of their skins and review devices from the target market’s perspective, when it’s different from their own. Plus the device actually seems so-so, with gimmicks instead of features, and overpriced. And finally if I can choose materials, I want marble or mother-of-pearl: colors, wood, and metal have been done to death.

As for the subsidy, once people have determined they need on-the-go internet, and that it will cost them $2,400 over 2 yrs, an extra $200 for a luxury phone is pocket money. A much different mechanism than $480 over 2 years for service and $700 for the phone (which is my case). Apparently “the uncarrier” is having some success in the US, we’ll see if they manage to keep ahead of the bad look-alikes, and what it does to high-end phones (though the upgrade program is confusing matters).

Kenton Douglas

“Plus the device actually seems so-so, with gimmicks instead of features, and overpriced.” How would you define a gimmick relative to a feature? In many ways the Moto X with the passive sensors is sign post to the next generation of devices (contextual). Motorola/Google intend to sell this phone directly; you suggest it’s overpriced. How much is it (contract free) from Motorola? I haven’t seen a price quoted.

obarthelemy

1- Examples of gimmick vs feature: the phone getting that it need to switch to camera when it’s being held horizontally in front of my face, vs better pictures. Custom backsides vs… anything else. Voice recog vs removable battery (note that voice dialing has been available for decades, nobody ever used it, maybe OEMs will get the message some time ?). Other missing features: SD slot, hardware buttons…

2- the retail price is not known yet, but the subsidized price is on a par with the GS4 and One, for specs and features that are one step down.

Kenton Douglas

1. OK, I see you’re a “it must have a removeable battery and SD card slot” person. It’s a wonder how Apple ever sold an Iphone? Hardware buttons are a preference – I prefer on screen buttons. There’s a difference between voice dialing and Google Now in my opinion. Again, I would reference contextual computing.
2. You say the ‘features’ are a step down; apart from the above preferences (battery/SD card) you have, what ‘features’ are missing? Others might conclude a lot of the ‘features’ (software) on a GS4 are gimmicks. Also, the ‘spec wars’ are essentially over. There is nowhere (sensibly) to go after 1080p – which is already an overkill – and 4 CPU cores on a 5″ smartphone. Four cores are only an advantage if applications are optimised to make use of them. I can’t think of any outside of synthetic benchmarks. Real world usability is as much about the software (OS) implementation and optimisation. If you think there is a material difference between 720p and 1080p on a 4.7″ screen you have excellent eyes!

Kenton Douglas

” A developer acquaintance has predicted lukewarm sales for the Moto X, in part thanks to its lack of carrier exclusivity and branding.” … It’ll be very interesting to see how this detail plays out. In many ways it’ll provide a good gauge of relative brand value (Google vs Apple).
“I think we’ll see that features, relative value and carrier backing may end up having a lot more to do with success than a subsidy on a rather expensive phone.” Which is the expensive phone you refer to? Iphone or Moto X?

Walt French

I meant the Moto X. Reviewers have said they don’t see how its “$199” price is justified.

BTW, the other feature that the dev noted was a concern about bugginess. Always a risk with an immature code base, such as the new camera logic and the wakeup feature, and I took it that this dev is especially irritated by unreliable parts of the Android code that he has to work around.

Unlike reviewers, however, I like Moto’s efforts to refocus Android on user features. Whereas the reviewers dismiss the X because other phones have higher-rez screens and more GigaHertz of processing, I think that if Motorola can shape an image of offering well-thought-out user-centric features, it’d dramatically shift the overheated and sometimes blatantly false “performance” marketing we’ve had ever since the original “Droid does.”

That’s a big “if,” however. Samsung has already thrown dozens of features up against the wall and none of them seem to have much staying power in user affection. Even Apple’s FaceTime seems to be building its usage levels oh-so-slowly.

Kenton Douglas

OK thanks for the feedback.

obarthelemy

just clicked on this: “I could hardly dismiss that subsidies matter, and I won’t. It’s quite clear that when iPhones were new, people were unwilling to take a chance on being stuck with a new technology that might be a flash in the pan,”

So you mean that *because* early on people where unsure of the tech and products, they were more willing to make a multi-year, multi-$K commitment ?

Walt French

Yes, insofar as it represented less of a commitment to Apple—a complete unknown in phones, widely dismissed by the heads of Microsoft, Palm, Motorola and others—and instead became a contract with AT&T.

The AT&T and Cingular branding wasn’t exactly going that well, but my wife’s company had a deal with AT&T that made it easier to go with Apple when the edict of “no personal use of company phones” came down. (I stayed with my month-to-month T-Mo deal, and my trusty RAZR until it bit the dust.)

I’ll add here that perhaps I’ve not appreciated how much “subsidies” serve as consumer financing. Especially in Europe and substantially in the US, consumers are trying to recover from a debt binge, and banks are reining in lending. I was always amazed that Apple managed to succeed so spectacularly with the iPhone, in the middle of what has now (in many ways, such as unemployment rates) exceeded the worst depression in the last century, and a new form of credit, courtesy of the carriers (which in the US are blessed with very low financing costs thanks to their high profits, something that is NOT true in Europe).

Subsidies are simply not part of the story in many nations such as China, nor is the credit crunch. I’ll note that Apple recently started providing credit in China, which has historically had a strong savings/cash-purchase culture; non-bank credit in that country has soared and may in general have to do with younger consumers who haven’t built savings commensurate with their incomes & aspirations.

Relentlessfocus

It’s my contention that the iPhone 5c is not aimed at third world markets because the price points there in general are too low. I think the iPhone 5c is designed to win over existing Android users in current markets. On this evidence it could.

obarthelemy

It’s more of a subsidies vs unsubsidized thing. The iPhone 4 is already free with subsidies, but is very expensive for its specs at retail (450€ @16GB, that’s only 50€ less than a Galaxy S4).
Also, maybe margins, since Apple margins have been taking a dive recently? The new phones are probably much cheaper to make.

The issue I see is that rich markets still have a lot of subsidies, so the 5C won’t make a huge difference, while the poor markets probably won’t pay the Apple premium anyway. And there’s the cannibalization issue, cf iPad mini.

DesDizzy

Thanks for the heads up on the site. But re your comment “subsidies vs unsubsidized thing”, what does this mean? If all high end smartphones are subsidised equally and iPhones still outsell all of these phones, what does this prove?

obarthelemy

They are not subsidized equally. In my country (France)
Retail prices: iPhone 5 679€ (AppleStore), GS4 500€ (Amazon)
Contract prices: iP5 199€, GS4 199€ (for the biggest carrier: Orange)
On the other 2 carriers, there seems to be a 100€ advantage for the GS4 (I didn’t check the minutiae of the contracts), so they split the retail difference with the customer, ie they still subsidize the iPhones significantly more than the Galaxies.

More generally, it means than iPhones need subsidies to succeed. That does not mean they are worse than similarly-priced high-end Android phones (which I’m sure thrive on subsidies too): it probably means that high-end phones in general need subsidies to reach beyond the high-end segment (what a surprise), and that Apple benefit disproportionately from subsidies because they *only* (for now) offer luxury phones, and because they get more subsidies than competitors.

DesDizzy

With all due respect, there is no evidence that Apple benefit more or less from subsidies (indeed the market that you mention, France, is not a successful market for the iPhone). You spoil a good point “t probably means that high-end phones in general need subsidies to reach beyond the high-end segment”

By trying to bend in an anti-Apple jibe. All things being equal, if your point had merit, for high end phones. Subsidies would benefit all equally. The evidence suggests that phone-co’s like to stick to certain buckets i.e. free for 25/30 pm with 2 year contract, and there will be 5/6 phones within this group. Your point, that iPhone alone benefits from this globally does not make intuitive or evidential sense.

obarthelemy

With all due respect, there is all evidence that Apple benefit from more subsidies, since the subsidized price is the same whereas the full retail price isn’t. I don’t know how to make it clearer, and it makes plenty of intuitive and evidential sense.

Since Apple take in more subsidies, I posit that they benefit more from subsidies. Do you have any intuitive or evidential input to the contrary ?

On a related note, Apple thrive in subsidized markets, and bomb in unsubsidized markets. And also Apple don’t have low- nor mid-range models, that thrive in unsubsidized markets.

DesDizzy

Two points. Not sure if you have any experience of retail, but doing a straight comparison of “retail” prices is not necessarily useful as it is well known that Apple demands that telco’s agree to huge fixed buy contracts and consequently get appropriate discounts. Secondly, more importantly, you will note that many telco’s have said that the iPhone is profitable for them, albeit at an upfront drain. It must therefore be the case that these customers make them more money (are more profitable) than alternatives. You may note that the large telco holdouts, like TMobile did not agree to take iPhone for love, but hard headed business case. Don’t see how a more profitable phone equates to a subsidised phone.

The business case would be price+usage, it is not just price. The business of the telco is usage not product.

handleym

Apple is not, in any sense, “bombing” in China…

A more realistic statement would be that there are some low-end markets (India, Indonesia, most of Africa) where Apple has felt (probably correctly) that they do not offer a product that makes sense for the market.
My guess is that Mercedes also doesn’t plan to sell many cars in India, but that doesn’t mean that Mercedes is “bombing” in India, or headed for bankruptcy.

DarwinPhish

The fault in your argument is that you do not know how much Orange paid Apple for the iPhone. I am certain they did not pay full retail, so you can not base the subsidy amount on this. Similarly, you do not know how much Orange paid Samsung for the Galaxy, nor do you know the secondary costs (e.g. support) to Orange for the Galaxy.

Even if the carrier does subsidize the iPhone more, they do so not to sell more iPhones, but to gain (or retain) more customers. The iPhone does not need the subsidy; the carrier needs to offer the subsidy to satisfy the customer. True, without the subsidies, the carriers would move fewer iPhones, but they would sign fewer customers to lucrative contracts. Carriers around the world are not so foolish to make the iPhone cheaper solely for the benefit of Apple’s profits.

obarthelemy

i don’t see how that’s relevant: my point is not that subsidies are more or less expensive for carriers depending on phone/brand, but that subsidies help Apple disproportionnately becasue they erase the reatil price difference between Apple and others. Your reply doesn’t address that ?

DarwinPhish

Your claim was, “They are not subsidized equally” and you used retail pricing to back this up. That is incorrect because the carriers do not pay full retail. The subsidy is the difference between what the carrier pays and what the carrier charges, not between what the consumer could pay elsewhere and what the carrier charges.

You then claim the subsidies help Apple, seemingly ignoring how much they really help the carriers. Without the subsidies they would have fewer customers. If they carriers are subsidizing the iPhone more than other phones it is because there is value to them in doing so. The implication is that an iPhone user is more valuable to the carrier than the GS4 user. The subsidies are a response to consumer demand, not just the mere driver of demand.

obarthelemy

Sorry, ambiguous wording, I meant: “subsidies do not affect their prices equally”. From the perspective of the consumer, not of the supplier.

randomness9090

“it means than iPhones need subsidies to succeed”

The same principle is true for the GS4. It has greater success where it is cheaper. In the end, many buyers are price-sensitive, but where the cost is about the same, people prefer the iPhone.

Relentlessfocus

Apple margins have taken a dive relative to the short period that the iPhone was taking off but historically Apple margins are rather at the higher end. It’s wall street and the linkbait sites that are freaked out about margins in the mid to upper 30s. But I agree that the iPhone 5c will be designed to give iPad mini like margins.

I don’t think this is a lower tier China or 3rd world phone. Even though cheap phones destined for the developing world are a growing proportion of phones, these are very low margin high volume phones which in total may account for 20% of all phone profits. I think the 5c is designed for middle class Chinese, India and the lower tiers of the western market who already own a cheap Android phone. The 5c coupled with iOS 7 is going to be an interesting offering. In China and India it also comes with inexpensive financing.

Kizedek

It doesn’t really matter if a product is cheaper to make or not — the margins are percents, not absolute values. Historically, Apple’s gross margins take a hit with new products.

The longer a product sells (eg, the iPhone 4), the greater its margins because the amortized fix costs/development costs, etc. have been paid off. If a product continues to sell for three or four years, then the per unit price comes down, which is only natural (unless maybe there are drastic fluctuations in material costs; but material costs usually come down too, offsetting smaller orders).

Let’s say Apple intends to make 30% margins on the iPhone 4 (or any product). Figured into their detailed plan is their development and fixed costs of setting up production, etc. They figure on recouping those costs after, say, 200 million units, which they hope to sell over two years (25 million a quarter). Well, it turns out the product was popular, and they sell 30 million a quarter, PLUS an additional 10 million per quarter for a further 2 years after the launch of the next version phone! Suddenly, the margin is 34-36%, even if the price drops 50-100 dollars. (I think)

Unfortunately, if gross margins fluctuate down even one percentage point, Wallstreet absolutely freaks out: despite its being a sign of Apple “innovating”; despite no-one else selling as many units of a single comparable product; and despite no-one else making such margins on high-value items with the added value of good OS and third party software. MS can’t sell its products and takes a 900 million write-down instead.

templewolf

Good point. This supports the theory that Apple will keep Iphone 4 in production another year. Why not it still sells well.

Tatil_S

It is difficult to design an OS with new features and heavy demand on GPU while still supporting old phone models. If Apple sells iP4 one more year, it will have to balance new features against support for iP4 until iOS9 or 10. If it stops selling it now, it can easily get away with cutting of support on iOS8 or 9.

Shameer Mulji

Doesn’t matter. The iPod mini went onto record-breaking sales when introduced and yet Apple killed it with the iPod Nano. Apple has proven itself to be a company that doesn’t fear cannibalizing its own products no matter how successful they are. If they don’t do it, others will.

That’s why Horace has mentioned many times, in his blog posts and podcasts, that Apple should be hard at work developing a product that will kill the iPhone, otherwise someone else will.

obarthelemy

This is entirely dependent on the fixed vs variable costs.

If a model costs $10b to launch (design, tool for, advertise, market, support…), then $10 per to make, you’re probably better off riding its long tail. If, conversely, a model costs $100m to launch but $300 to make, the break-off point where an half-price ($150) refresh is worth it is 700k. I’l assuming between newer, more integrated components and different materials, Apple’s savings would be in that range. Not the launch investment though.

Remaining beholden to old designs and processes (let alone management and strategy) has done in many companies.

As for Wall Street flipping out, that’s what they do. They’re both flipping out and thinking others will flip out, which feeds the valuation spiral. There was a famous experiment a decade ago where monkeys bet out stock analysts… Plus, if analysts knew how/what/when to trade, they wouldn’t be trading other peoples’ money but theirs, anyway.

Kizedek

It is also entirely dependent on having a good product that people want to buy. Meaning that “trendiness” has little to do with it.

Space Gorilla

“taking a dive” is hardly an objective way to describe Apple’s margins. They’ve simply gone from astounding down to great. In no reality are Apple’s margins poor.

peter

The real question for Apple is whether they are willing to cannibalize their own high margin sales.
If they were to take the guts of an iPhone 4S (a little dated but current enough to run iOS 7), put it in a cheaper plastic package and accept a 30% margin, then they could presumably hit a $299 price point without subsidy. Differentiation with the high-end iPhone would be a matter of memory, camera, finish and – perhaps – extended battery life for business users (and addicts); all of which would minimize cannibalization.

This goes back to the old Steve Jobs quote “At the critical juncture in the late ’80s, when [Apple] should have gone for market share, they went for profits.” Although they may make the same mistake again, it is equally possible that they will actively destroy the price umbrella that exists today and try to obtain a lock on the US market and other markets.

Relentlessfocus

I don’t think this 4s in a new shell idea will work. First the screen is likely an iPhone 5 size for all sorts of reasons which means that the cpu/gpu have to push more pixels than a 4s. That will likely mean more processing power so the 4s processor probably won’t be powerful enough. That will require a bigger battery to get the same or similar battery life. A bigger battery is not a problem as the shell will be bigger. They can use the 4s cameras though it might be cheaper to scale the 5’s cameras. We’ll see. I’m not sure if the 5c will have an LTE radio, my thinking is it won’t in year 1. If they do, the 4s radio won’t be sufficient. And they’re certainly not going to use the 30 pin connector so those parts need to end in a lightening connector. I also think the memory will be limited to 16gb this year. I suspect the internal ram will also be smaller than the 5s. All in all just reusing a 4s in 5c duds is not the way forward.

I think the better way forward is to design and engineer a cheaper phone, one that can be carried forward for at least 2 years and possibly more and design and engineer it to the margins they’ll want to hit, probably similar to the iPad mini. This is initially a more expensive approach but it gives them a platform to build on going forward.

Differentiating won’t be hard. If you want a better camera, more memory, faster processor, LTE, lighter weight, thinner sexy metal body, you’ll get the 5s. If not then the 5c is for you.

Nick Murphy

Think about what the “customer” will hire a low end iPhone to do – in this case the customer is the mobile phone company.

The iPhone thus far has been hired to increase customer ARPU through driving a need for an expensive data plan.

What the mobile companies need now is to move everyone – not just the high end – to LTE as soon as possible so they can free up 3G spectrum to be re-used for LTE.

A low end iPhone will need LTE in order to be of any value to the mobile phone operators who are the customers of the iPhone.

AChicagoLad

Agree with your comment on the need for LTE if you are talking about US. Used iPhones will continue to migrate to emerging countries – where LTE is not as prevalent.

handleym

Close, but not quite.

The assumption that phones NEED to distinguish themselves on their tech specs is an assumption from the past. We’re getting close enough to the technological edge that this is no longer an important differentiating point. Lexus and Toyota aren’t differentiated by tech specs. (Well, they may be in that the Lexus theoretically has a top speed of 220mph and the Toyota a top speed of 120 mph, but very few buyers care.)

Apple owns the A6, so there’s no reason not to use that in the new phone. (Perhaps a single core version.)

LTE is tricky, but the argument that it helps with carrier acceptance makes sense. Apple may be able to negotiate a deal with Qualcomm whereby the phones all ship with LTE, but Apple only pays the LTE premium for shipments to those countries that have LTE up-and-running, or something like that.

An obvious point of differentiation could be new iPhone gets 802.11ac. A second obvious point would be lower quality camera in cheap iPhone.

I think it makes sense for Apple not to skimp on GPU (they want even their low-end phones to feel delightful) and RAM (that just makes life difficult for Apple for long term OS support). Slower flash may be an acceptable tradeoff, so flash speed of about the iPhone4, not the iPhone5.

But ultimately I don’t think it’s the tech specs that make the difference, it’s the fit-and-finish. Much of what you pay for when you buy a Mercedes is the solid sound the door makes as it closes, the feeling that everything is aligned just right. You don’t get that with a Toyota — but of course you’re saving 50% of your money.
Competing on fit and finish was never tried in the commercial PC world (ie the Windows world) because it’s tough when businesses are buying. But phones are personal purchases, and it seems reasonable to assume that, just like there are people willing to pay more for a car that just feels better made, so there are people who are willing to pay more for a phone that feels better made. If you don’t think the magical fit and finish of iPhone5 (let alone 5S or 6) is worth $200, well, Apple will have an alternative for you.

The higher end iPhone will always have better specs, and there are tech nerds who will buy it based on lusting for those specs. But I am pretty sure the ads won’t work that way. The iPhone 5S ads will be about classiness — it looks so beautiful, it feels so good in your hands, it’s seamless, a work of art. The iPhone 5C ads will be about how it’s an iPhone, and does everything an iPhone ever did, and now everyone can enjoy the iPhone experience. Basically no different from a Lexus ad compared to a Toyota ad.

templewolf

I’m not sure where everyone is getting the name 5C from, but I would be willing to bet IF a low end Iphone is released it will not have that name. As evidence I would like to point out that for the third generation Ipad they dropped the generational naming convention and just called it the “new Ipad” to leave room in the brand for the Mini. So if an iphone is released this year and its just called “the new Iphone”, you have your answer. I also think it entirely feasible that the Iphone 4 which continues to sell well, just stays in production even as a new Iphone is release and is just sold for less. Releasing a new phone with the 4in screen and A5 processor at a 300$ price point would be a poor business decision as it will cannibalize both the 5 and the 4S and significantly drive down the Iphone average selling price.

Shameer Mulji

I will bet you, as soon as the iPhone 5C (or whatever it’s called) comes out, we will see the end of the iPhone 4 and 4S. Apple is shifting to 4″ Retina Screens and Lightning ports as absolute minimum requirements. The iPhone 4 & 4S have neither.

And as far as the price goes, I’d be surprised if the price is below $399.

Kenton Douglas

$399 would be too much without a carrier subsidy.

http://policydiary.com/ John S. Wilson

There’s no way Apple will release a new phone without LTE. Just not happening. I also doubt they would limit the memory to 16GB when memory upgrades are practically all profit. Someone could easily purchase a “low end” iPhone but choose to get a 32GB version and pay a $100 premium. Meanwhile that additional 16GB of memory cost Apple $7*. So why would Apple leave $93 of profit on the table?

I agree. LTE is pretty much standard fare now. It would be stupid not to have it.

Shameer Mulji

“First the screen is likely an iPhone 5 size for all sorts of reasons which means that the cpu/gpu have to push more pixels than a 4s. That will likely mean more processing power so the 4s processor probably won’t be powerful enough.”

You couldn’t be more wrong. If you did a little research, you would find that the current 5th generation iPod Touch uses the exact same 4″ Retina Screen as the iPhone 5 and has the exact same A5 processor as the iPhone 4S. And guess what? It has no problems pushing the pixels on that screen.

We don’t know the exact specs of this rumored iPhone 5C but assuming it does have the same specs as the 5th generation iPod Touch, wrapped in a colored, plastic shell, then there will be nothing to worry about performance-wise.

Space Gorilla

I’ve been waiting and waiting for an iPod Touch with the phone bit added, for my kids. I suspect that would sell like hotcakes, even at $299. I’d buy four.

Yacko

I think it is likely the “C” is for China.

TK421

C is for COOKIE.

Come on now.

Kizedek

Perhaps it is for “Cha-Ching”

handleym

Then it should be the iPhone 5中国
That would certainly shut up Americans complaining that they can’t buy it!

Kenton Douglas

Agreed on the target market. Not convinced that Apple will be able to reach the price point needed to compete effectively. If a 3 year old Iphone 4 is $450, what price is an Iphone 5 in a plastic case (5C)?
We’ll have to wait and see.

highr0llerr

What’s even more interesting, is that it happened 3 quarters after the latest iPhone launch, the quarter which is typically quite slow for Apple, and only a few months after the launch of Samsung’s flagship device. The next couple of quarters will be really interesting to observe.

Kenton Douglas

Do you think the composition of those Iphone sales (possibly 4, 4s) to new carriers like T-mobile is a factor? We’d be in a better position to assess if a breakdown of Iphone sales by device type were available.

http://sumocat.blogspot.com Sumocat

These are clear indicators the decline is nearing (if not begun), but let’s forget about all the signs leading up to now. Android sales on Verizon have been near flat for almost two years. Sprint and T-Mobile, two members of Android’s Open Handset Alliance, have embraced iPhone. And iPhone has crept into Android safe havens of regional and prepaid carriers.

There are, of course, still many outlets that do not support iPhone, including the prepaid kiosk at my local supermarket. Android also saw a notable (and as yet unexplained) spike on AT&T last quarter. But it is safe to say Android’s free ride through iPhone-free territory is over. Time for the real competition to begin.

Kenton Douglas

Largely agreed. But I think the source of the competition for Apple hasn’t properly been discussed (Motorola). The Apple advantage is consistency of product – there’s no scope for consumer confusion with a maximum of three devices at any one time versus dozens of Androids for varying OEMs.

http://ewparris.net/ e.w.parris

It seems as though Android phones are very effective as advertising for iPhones. Buyers, unsure if a smartphone is right for them, purchase a low-cost Android device, find they like the idea but want a better phone, and trade up for an iPhone.

Idealogue

This is pure speculation. There is nothing in the data that shows this type of causality. I could come up with 5 more reasons the data is as it is that are equally plausible. For instance in the top graph, it looks like the loss in non-smart phones (strangely)EXACTLY mirrors that of the iPhone gains – from that it could be speculatively concluded that non-smartphone users simply jump straight to iPhones, in opposition to your assumption.
The data simply does not have enough information to say all that much as for why.

Travis Harvey

I think there are bunch of previous studies that suggest this. Several market analysts have made the observation over the last 3 years that androids fast market gains weren’t so much from user choice, but rather from cheap phone manufacturers switching from proprietary feature phone OSs to Android. So now you go into a store and there are 30 Android options, but most are feature-phone+ (or sub-smart phone?) devices that don’t compete with the high-end android or iPhone.

This is also observed in the web and internet usage stats, that a large part of the Android marketplace doesn’t use the smart part of their phone (or can’t because it isn’t really usable)

Kenton Douglas

How do we define a Android “feature-phone+”, or “sub-smart phone”? I’m genuinely intrigued.

Space Gorilla

The most practical way to define anything is by use. How a thing is used defines what it is. If I use a baseball bat as a coat rack, is it a bat or a rack? It’s a rack of course. If a large segment of Android customers are using their devices in much the same way as they previously used feature phones, then those devices are arguably feature phones even though technically they may be smartphones. The more I think about it the more I realize Apple doesn’t actually have that much real competition.

Kenton Douglas

OK, interesting. See below.

http://www.noisetech-software.com/Home.html Steven Noyes

An Huawei M835 would be a feature phone+. This type of Android phone represents the majority of Android phones sold.

Kenton Douglas

Yeah, a pretty grim looking device. But that’s Android v2.2. 2/3 of the 900m Android devices activated that access the Play Store are running v4.x (according to Google). I wouldn’t class a v4.x device as a feature phone+ regardless of hardware specs. They are also claiming 50B+ downloads and 1M+ apps, so the notion of Android users (or a majority) using their device as feature phones isn’t one I can agree with. The user interaction (web browsing etc) might not be as strong, but I’d certainly class the majority as smartphones.

Space Gorilla

Google also changed how they measure this stat, directly from Google’s developer page: “Beginning in April, 2013, these charts are now built using data collected from each device when the user visits the Google Play Store. Previously, the data was collected when the device simply checked-in to Google servers. We believe the new data more accurately reflects those users who are most engaged in the Android and Google Play ecosystem.”

So Google is making a distinction between users who are most engaged and users who are not, and they are no longer measuring the users who are not engaged.

Kenton Douglas

Somebody’s got be engaged for them to have 50B+ downloads. Equally, I’m not sure why developers would populate the Play Store to the tune of 1m+ apps if users weren’t downloading them. Ultimately we only have these numbers to work with. Therefore, any analysis is less than ideal.

Space Gorilla

Well, we used to have a wider scope of numbers, from Google, but they changed how they measure Android version adoption. The result? Adoption of version 4.0 and up jumped about 20 percent overnight. The data is now skewed to users that are more engaged, so naturally it skews towards more up to date versions of Android, but that isn’t an accurate picture of Android, it is simply Google’s picture of Android.

Kenton Douglas

“it is simply Google’s picture of Android” … it certainly is. We’ll have to look out for data points elsewhere when they become available.

http://www.noisetech-software.com/Home.html Steven Noyes

The Android store version stats only refer to phone using the Play store. I bet many low end device never go to the Play Store inflating the % of 4.x devices.

Kenton Douglas

Maybe. We can only work with the information we have. For example, the internet usage stat often quoted isn’t global (and often centred on the US).

Chaka10

Can’t just eyeball it. Do some math. See my post.

Jeff G

That’s exactly what I did. One droid, then iPhone 4S (and in all likelihood) iPhones indefinitely. Our family has 5 now.

Chaka10

The 16.1 mm decline in non-smart users represents first-time smart phone adopters. According to CIRP data reported by AllThingsD yesterday, “under one-third of first-time owners buy an iPhone”, ie, less than 5.4 mm of this 16.1 mm. It seems a safe assumption from the comScore data that substantially all of the remaining first-time adopters, say ~10.6 mm, went into Android. But Android only gained 6.6 mm NET new adds, which means that platform must have lost something like 4 mm users to iOS (and maybe some small numbers to others). The numbers are not necessarily precise, but I think this is strong direct evidence for the proposition, on which I’ve been pounding tirelessly, that in the US, and I believe in other developed markets as well (see recent Kantar data on iOS gains in GB, France, etc), iOS will start gaining share on the basis of loyal replacement demand and net positive churn from other platforms. IOW, the maturing high-end smartphone market dynamic is bullish for Apple, and the focus on declining iOS share of first-time adopters, eg, in Ina Fried’s piece on AllThingsD yesterday “Apple Faces Hurdles Attracting First-Time Smartphone Buyers”, is missing the real point.

Chaka10

I think it’s worth appreciating, slowly, this analysis suggests that (a) Android is losing somewhere like 4 mm users to iOS in the 6 mo period in the US presented by Horace and (b) something like 36% of the iOS net user gains is from positive net churn from Android. Consider the implications, looking ahead, when inevitably first-time smartphone adoption slows even for Android …. I ask, which platform really is looking vulnerable?

AChicagoLad

“iOS will start gaining share on the basis of loyal replacement demand and net positive churn from other platforms.”

Apple will narrow the gap further with Android in US over the next year. A few years out it will be 60-40 in Apple’s favor… at least.

Kenton Douglas

What happens if the current carrier subsidy model in the US starts to erode?

AChicagoLad

Not sure where you are going with this… are you also saying that contract mode is going away?

Kenton Douglas

No, not necessarily. Perhaps something in-between where the monthly cost of the contract varies according to the handset cost. I’m not sure if there is anything like that at the moment in the US (T-Mobile?). Regardless, I think price erosion will prompt more people to buy devices outright. Basically a more mixed market.

Softbank has just bought/merged with Sprint. Softbank has been hugely successful with iPhone.

T-Mobile
– I am sure that T-Mobile would have a similar contract to Sprint. So they will have to sell a certain number of iPhones. They are also trying to steal customers from other carriers and will use iPhone to do so. Expect more and more of T-Mobile base to move to iPhone.

AT&T + Verizon
iPhone is already hugely successful at AT&T and is doing almost as well at Verizon.

Only place left for Android in US is with non-contract customers at top 4 carriers and at the remaining pre-paid service providers like Tracfone. Even in these areas, Android will start to fell pressure from used iPhones.

At least here in US the game is over for the next few years.

Kenton Douglas

“At least here in US the game is over for the next few years”
Maybe, maybe not. We’ll have to wait and see how things develop in a very dynamic market – look at it now compared to 2-3 years ago. I’m sure the carriers would rather have a diverse portfolio of device types.

AChicagoLad

” I’m sure the carriers would rather have a diverse portfolio of device types.”

Yes they would, and will often try to talk you out of buying an iPhone so that they can do as you say and balance their devices sold. Obviously, if you are upgrading an existing iPhone this doesn’t occur as much.
This is a fine balancing line for the carriers in that they risk alienating prospective customers. Now that iPhone is on all 4 of the major carriers this becomes more risky.

When I say the game is over, I mean that Apple will switch places with Android in the US Comscore data over the next couple of years. That is definitely already in the cards.

However, it will be REALLY hard for Apple to get past 60% because the carriers will fight against that.

Chaka10

Yeah, I’ve been posting on this theme for a while (initially in a comment to Ben Evan’s April 16 piece “A note on install bases”), though I’ve sensed the reception from the Apple support crowd has been somewhat ambivalent at times to the notion that the high-end smartphone market has matured, notwithstanding my consistent bullish stance on that market dynamic.

In of my early posts (on Ben Evan’s April 22 piece “Apple tipping points – up or down”), I described Apple’s net churn advantage compounded with the stickiness of existing iOS users, as “sort of like a lobster pot effect (not very flattering, I know, but I think descriptive)”. I attach the full post for your interest.

The main counter argument, which we’ve seen again, is that this is US carrier subsidy driven. That is, in my view, a complete red herring (unless you believe carriers are simply uneconomic and operate in order to make money for Apple, rather than themselves). T-Mobile’s “Un-carrier” initiative (removing subsidies, but providing financing and lower monthlies) has worked fine for its iPhone sales, and the other carriers are actually introducing accelerated upgrade plans. The economics of this is simple: iPhones retain high residual values (even old iPhone 4S sell for more than $200 in an active resale market). As I posted in a comment to Asymco:

“US subscriber who paid $199 for an iPhone 4 on a 2 year contract in 2010, can now sell it on eBay with prices during the first quarter of this year that range between $355 and $430 (for fixed price sales) and $280-300 (for auction sales). That’s a profit, after 2 years of usage”.

You can find my comment in the 3/11 Asymco piece “Where are the Android users”. Note, those prices are a bit dated obviously, but Piper Jaffrey subsequently conducted some studies, tracking resale prices from 3/15 onwards, which continue to support this analysis.

AChicagoLad

All good stuff. One item to add to your thinking. There are now large numbers of individuals who have an iPad but do not have an iPhone. They have “joined the club”, experienced the Apple ecosystem and will be upgrading to an iPhone over he next year or two. This is a continuing trend.

Space Gorilla

Perhaps a bit off topic, but what I find fascinating is there’s one company where I can get a full range of computing devices and accessories, from desktop to laptop to tablet to pocket, plus Apple TV, plus the app ecosystem and iTunes, all fully supported and all quality products that work well together.

Most iPhone users who want to “carry a second battery”, either use a phone case battery, or an external usb battery which can be used to charge multiple usb devices, not just an iPhone. It really doesn’t need to be a difficult problem to solve.

Kenton Douglas

Looking at the Kantar data it’s only GB, France outside of the US that have seen a nett gain. There is no ‘etc’

Space Gorilla

Then Apple closes the price umbrella as needed. I think that’s obvious.

Kenton Douglas

I think that’s already in progress. The question was (perhaps not stated clearly enough) what impact – if any – this has on this their business model. Just a question …

Chaka10

There’s a perception that the US carrier subsidy model somehow exists to benefit Apple. That theme (1) ignores history (both on the model itself and how Apple got into it), (2) fails to account for the economics and self-interests of the carriers (why do they want to benefit Apple?), (3) is contradicted by current market trends (T-Mobile’s “Un-carrier” plan, which replaces subsidies with financing and cheaper monthlies, works fine, other carriers may move to offer the same, and all carriers seem to be moving to accelerate upgrade cycles), and (4) completely ignores the resale market and prices of used iPhones in the equation. That explanation feels, to me, like the original believes that the earth is flat or that it revolves around the sun — convenient and easy, but is really intellectually laze, fails to account for or ignores uncomfortable factual inconsistencies that are obvious on a closer look (like a rounded horizon).

Kenton Douglas

“There’s a perception that the US carrier subsidy model somehow exists to benefit Apple” … who puts that point of view forward? I think most manufacturers would benefit from this subsidy model.

Chaka10

The carriers don’t pay the same subsidy for all phones, as you know, but the point is, the subsidy model exists, and the carriers pay Apple in the amounts they do, because it’s in their interests to do so. Obarthelemy in particular seems to suggest that the subsidy model (and the high monthly prices) is un-economic or anti-competitive, some how.

Kenton Douglas

“the subsidy model exists, and the carriers pay Apple in the amounts they do, because it’s in their interests to do so” … agreed.

Vladimir

I agree with you too. But if we consider what is the interest of these carriers having the iPhone more subsided we might easily see that doing so starts to actually lose sense. Here is why. When iPhone first came out it started a revolution of data plans, right? So, you could expect more people to subscribe to such a plan then with non-smart phone. I remember you couldn’t sign a contract for original iPhone spending less than 100$ at AT&T every month. With dumb phone you could not use internet and voila had you balance at 30, 40, 50$ a month. But today, smartphones penetrated deeply into the mainstream so carriers cannot expect such an impact from new data plans and as a carrier you couldn’t possibly care less about what platform is one having if that one is using data plan. With this things changed I expect some pressure on Apple pricing. This does not have to reflect to the product prices the same moment, cause Apple can reduce its profit margin or make products cheaper to maintain the same price policy. But the pressure would be logical. To put it more simply, carriers care about the data plan subscriptions. In 2007, 2008 and 2009 those would drop badly if there was no iPhone to drive its increase. Now, there are plenty of good smartphones to jump in if iPhone sales drop, so the carriers could reduce their expenses greatly and still maintain data plan subscriptions increasing. Just a thought.

Chaka10

Carriers compete with each other, and a competitively priced iPhone offering (whether with subsidies or financing and reduced monthlies, like t-Mobile’s “Un-carrier” plan) is an important competitive tool. The point is it ultimately comes back to a question of underlying demand for the iPhone. The focus on carrier subsidies is a red herring.

Vladimir

Carriers competed against each other even in the Nokia times. Significant difference was made when one of them suddenly and strongly changed the strategy and supported iPhone heavily. Back then, the difference with subsidies were even bigger as much as I can recall. This is also a strong tool. To ditch one OEM (and make him a damage) or support some other more or just let them compete freely while your profit is raising. The demand for iPhone is in strong connection to these subsidies so it cannot be red herring. Kill the subsidies and set the higher prices and your demand drops, or, kill the subsidies and set the same prices and you profit goes down, your shares and investors find them in a stampede. Carriers are no charity nor stupid as you said less directly (they have their interest) which might change with time and the occasions on market and they we’ll negotiate the terms with Apple or any other company over and over again until they are satisfied. So there is no logical reason to believe them let Apple set their prices forever. We don’t know the details of their deals but it might already occurred at some level as the Apple’s profit dropped despite the more units sold (there are other reasons for that, I know). What you said would work if Apple is still the only one selling touchscreen smartphones.

Space Gorilla

Well, I think the answer is just as obvious, Apple will sell more iPhones.

Kenton Douglas

OK

Meaux

Why would total number of users go down? The population of the US is growing, not shrinking. Shouldn’t the loss of 1 million users be a red flag?

No, dirt cheap usually wins. Android is being put on a LOT of cheap (read: really bad) phones, and given away to new contracts. As far as high end, Android has a respectable base, but it’s not holding either. Plus you like most don’t realize that “open” does not mean “free”. It’s just a different business model that still costs money to use.

Space Gorilla

Dirt cheap does usually win, in a specific segment of the market. Not that there’s anything wrong with that, in certain purchases I make I am in that segment. But Apple doesn’t typically operate in that segment, which is why their profit share is usually so lopsided. I wonder, when we look at segments of the market do Android and iOS actually compete as much as analysts and pundits think? Many pro-Android folks have pointed out that it isn’t fair to compare a lower cost Android device to an iPhone, and that’s probably true, those devices aren’t really in competition.

Your article and all comments are very US centric and ignore the wider picture. The AFP article dated 7 Aug also quoted the US figures, but then went on to point out that worldwide, Android share grew to 79.3% of the world market in Q2 while the iphone slipped from 16.6% to 13.2%. In numbers Android shipped 187m phones while Apple shipped 31.2m. For completeness BB share dropped to 2.9% and Windows 3.7%. I have just bought a Samsung Galaxy Mega (unavailable in the US) with a 6.3″ screen and Jellybean 4.2.2. Boy do I get some looks when I pull it out. Am coming to Las Vegas and San Francisco in 4 weeks. Can’t wait to see more jaws drop! Hehe. [OK is is big, but am waiting for the S4 to be released in red here b4 I get one of those too. Its easy to get SIM free phones in the UK and deals – incl calls and data – are from 10 dollars a month]

Kizedek

You can make some comparisons between Android and iOS, but who or what company is “Android” in your statement: “In numbers Android shipped 187m phones while Apple shipped 31.2m.” It’s a meaningless comparison, and shows you are a member of the “Church of Marketshare”. Don’t waste your own time and ours. How many high-end phones did Samsung ship, while Apple’s have all sold through? What phone OEMs are growing? At whose expense? (probably Nokia/MS and RIMM’s as you note, among others)…

This has all been covered, do catch up. US is used as a proxy for trends because “smartphone” penetration is quite high.

Worldwide, “smartphone” is growing into the whole mobile market. It is expanding rapidly, faster than Apple is “slipping”. Thus, Android’s relative worldwide gains and Apple’s relative “slip” is not particularly meaningful, because both are growing at expense of non-consumption: Android is being installed as default OS on anything and everything, “smart” or not; and Apple sells only “smart” phones and tablets into an ever more demanding and sophisticated market which is beginning to see what can be done without a PC.

The mobile market is far larger than PC ever was, it is rapidly growing, and Apple is growing as well, with plenty of headroom. When “Android” marketshare grows (and some OS has to be put on the world’s phones), who is growing? Google? Samsung? In what ways? How well?

Chris Lickorish

How can it be covered? The figures only came out yesterday. I was quoting from the article in response to the US centric article. My information is that the smart phone market is nearing saturation. Hence the strong rumour apple are to introduce a cheaper product.

Kizedek

What’s been covered? The concept that relative “marketshare” figures are moving up down or sideways. There is US marketshare, there is “smartphone” marketshare, there is world marketshare, there is mobile marketshare…

The “information” is often misleading. Horace puts smartphone penetration in the US at about 60%, I think. That is about the highest in the world. There is also iOS 6 marketshare, which is far higher than the share for the latest version of Android.

A “problem” is that any phone running “Android” is often touted as a “smartphone” by definition, no matter the version or flavor of Android, or the hardware or the capabilities. Thus all the Android figures, “smartphone penetration”, marketshare figures, suspect activation figures (of which there is still a debate about how they are counted), etc. all re-inforce each other and defy real analysis.

There is no “saturation” if a user is merely switching a Symbian feature phone for an Android one. But whether it does represent “saturation” or not, is immaterial, as that person is still a good candidate for an iPhone next time around (and data implies that net switching always favors Apple).

All the “information” does is misrepresent the supposedly poor state that Apple is in and the supposedly great state that “Android” (Google, Samsung or whoever) is in; leading to a confounding of the pundits when Apple continues to make money and others lose money.

Chris Lickorish

When I visit the US I am sure it will be much like last time 2 years ago. Those clutching a phone will be clutching an iphone. What I can tell you is that of the 30+ friends here in the UK with iphones 3 years ago all but 6 or 7 have changed to Android – mainly Galaxy 2,3 or 4. Two others are in a quandary. They are definitely abandoning the iphone for Android, its just they can’t make up their mind between the HTC One or the S4. For me not being able to change batteries is a deal-breaker. I had 2 spare for my S3, and am awaiting one for my Mega, it should arrive tomorrow. With Sony and HTC following apple with no accessible battery Samsung is my option. The bottom line is that, the USA aside, Android are p*ssing all over apple. And I can’t see io7 changing that much.

Travis Harvey

Huh, why is swapping batteries important? I talk all day on one charge (iPhone 4S), and i can throw a stone and find a place to plug in if I need (computer, home, office). Can’t imagine carrying another battery is any more convenient than carrying the tiny charger… I can’t see who this would really be a feature for.

I just got a Nexus7 quad core tablet, and despite the hardware, the UI performance is unacceptably slow (5x slower than a 2 year old iPad2/iPhone4S. The UI/UX experience also feels like a series of iPhone patent workarounds (as opposed to the Windows 8 phones which feel like they put some effort into innovating their own UX). Samsung’s Touchwiz is even worse.

I don’t see Android as a competitor, just a cheap clone.

Chris Lickorish

I find a marked absence of charging points on budget airlines to Spain and on the deserted beaches once I am there.( I go 10 times a year). For text entry I use the 3×4 keyboard on the S3 and Mega, with SWIPE. Both unavailable on iphone where I regularly watch friends type out texts painfully slowly on their QWERTY option. I also find Google Now useful in Spain where it offers a currency converter, translation service (and more) without me having to bother asking for it. Sure, you now have that on iphone…but Google was there first. I find Touchwiz better than “pure” Android or HTC Sense which I cannot get on with…but each to their own. Android isn’t a cheap competitor, at around 30% – 40% less cost is just clearly good value, as my friends are discovering. And without the need for itunes I can drag and drop videos and music onto AND OFF the phone with ease. I organise the folders as I want, not as itunes (or for that matter WMPlayer) does.Clone? won’t ios7 have touch to copy like the s3/s4??

Space Gorilla

I think the overall point you’re missing is that the data seems to be fairly clear that when iPhone and Android are roughly equivalent in segment/availability/price, iPhone does very well. That speaks to a trend. The iPhone isn’t available everywhere and in every segment, the price umbrella hasn’t closed yet, in part I would guess because Apple needs to be able to supply the demand before they can serve lower segments of the market.

As others have pointed out, Asymco typically isn’t the place for comments like ‘pissing on Apple’. It’s about objective data as much as possible and not dumb fanboy arguments (swap battery! iOS sucks! Google was first! etc!). Please take that over to ReadWrite.

Kenton Douglas

“when iPhone and Android are roughly equivalent in segment/availability/price” … Don’t agree. I would suggest that the opposite is nearer the truth, ie. when there isn’t a carrier subsidy to mask a $650 Iphone Apple is less competitive. In terms of ‘segment’ Apple have three models active (currently 4,4S, and 5); in terms of ‘availability’ Apples global distribution is probably on matched by Samsung. But in terms of ‘price’ …

Space Gorilla

I thought it was obvious that the subsidy effectively makes the price roughly equivalent for the consumer. You frame it as ‘masking’ but the result is the same.

Kenton Douglas

Agreed. It’s the same in markets where the subsidy model is the preference. ‘Mask’ was a bad choice of term in trying to add emphasis. The point remains the same though.

Space Gorilla

Then I’m not sure why you don’t agree? It seems clear that when an equivalent segment of consumers can get an iPhone at roughly the same price and approximately as easily, the iPhone is extremely competitive and sells very, very well.

Kenton Douglas

Yes, but that scenario doesn’t apply to all markets. So it’s less competitive in price sensitive markets (obviously). That’s all I was trying to say … it’s a more expensive phone.

Kizedek

And that basically goes without saying. Apple doesn’t compete well where it doesn’t compete. So? (you and Obarthelemy sure seem to like your tautologies).

Samsung is in practically *all* markets (at every price point, every country, with twice the carriers as Apple, etc., etc.). And yet their absolute profitability isn’t near as good.

When Apple *is* in a similar market (and so far that usually means accessibility as Space Gorilla says), then the iPhone does extremely well as far as units of a single phone go. And this is why the Apple Stores are so effective — people get hands-on experience with an iPhone or iPad to see *why* they should pay more for the Apple product.

Of course the iPhone IS the more expensive phone. Duh. But, lower price alone doesn’t help if you are failing to give the value you are advertising. MS advertised “full Windows experience on a touch tablet that replaces a laptop”. They offered it at iPad or greater prices and failed. They offer it for less and still fail. Until Apple does come along to a particular market, most people think they just want a phone that does a couple of things. Then they see what all the fuss is about — computing power in your pocket.

In other words, whatever price point an Apple product (iPad, iPhone, iPod, Mac) hits, it is extremely competitive and represents great value. A “comparable” product for less is never truly comparable, and people soon find that out (quality, usability, durability, TCO, whatever).

So tradeoffs will always be made, and each person is responsible for their own purchasing criteria and decision. But Apple will now make the iPhone available to a new set of potential customers that won’t have to dither so much about the higher price point of the iPhone. Rather than this being a capitulation by Apple in order to maintain or chase marketshare, it will quickly become evident that it will be a great product for a price that even more people will pay.

Space Gorilla

That’s an excellent way to frame it, “looking to pay Skoda prices but would stretch to Citroen prices”. I would guess when Apple can deliver a quality product at a lower price *and* meet the demand, then we’ll see a lower cost iPhone. We can’t expect Apple to do everything all at once.

Paul Parker

Recharge for my Samsung Galaxy S4 (down to 10%) takes less than two hours, will try to check it more often next time.

Shameer Mulji

How is Android pissing all over Apple, when Apple is making 53% of ALL smartphones profits worldwide, and EVERY other smartphone maker except Samsung is losing money?

Kenton Douglas

Strictly speaking they’re not all loosing money. Might not be making much, but not every OEM is actually loosing money.

Space Gorilla

Sorry, I have to correct you, it’s *losing* not *loosing*. I really hate being that guy but this particular mistake drives me crazy. Loosing means to make something less tight.

They “cherry pick” the US in many studies because we have states with economies the size of Euoupean countries. Likewise, the center of most software innovation is found in the US. While you want to pretend the US is not an important market in software, your assessment could not be further from the truth.

FlyOffTheWall

The article is titled “Signs of US Android net user decline”. That makes it pretty evident that this article is about the US market, does it not?

Shameer Mulji

The headline doesn’t make it evident, but reading through it, yes it is US centric.

Kenton Douglas

Indeed. A market where Apple are protected by the carrier subsidy model. That’s the key takeaway. In most other markets where this model doesn’t apply to the same extend (or at all) the picture is rather different.

Space Gorilla

I’d say the key takeaway is actually very positive for Apple, it shows the opportunity and the path Apple can take to have the same success in markets without a subsidy. Keep in mind that Apple has a lot of room to maneuver in their margins, much more than others.

Kenton Douglas

Yes, but that room to maneuver will invariably mean lower hardware margins. I think the key for them is to grow their web services offerings to exploit a captive user base. If those services are compelling enough, then they can form the basis of a virtuous circle by attracting new users even with a premium on the hardware price.

Space Gorilla

If those services are compelling enough? It seems pretty clear from customer satisfaction and retention that Apple is doing fine on this front.

Kenton Douglas

The customer satisfaction and retention stats make very good news for Apple. But as well as retaining, mechanisms will be needed to attract new customers, ie. growth. You seem confident that they have the required bases covered, so there should be no issues for them going forward. Certainly their cash position provides a very, very significant buffer regardless of how the market evolves. Should make fun viewing.

AChicagoLad

“The customer satisfaction and retention stats make very good news for Apple. But as well as retaining, mechanisms will be needed to attract new customers, ie. growth.”

Yes this is good news.

As far as growth – Here is how I think it’s going to work over the next couple of years – in US.
– Apple retains a very high % of their iPhone Customers (90%+) as they upgrade to new phones
– Apple gets a fair share of the remaining non smartphone customers – in other words, first time smartphone buyers – let’s say 30-40%.
– Apple steals a decent share of Android customers as they upgrade their phone – let’s say 25-30%.

Plenty of growth in second and third points.

Jurassic

Chris Lickorish, you are right. Although Apple has been beating the pants off all of those other Android phone manufacturers, and their myriad of phone models, it is a different story worldwide.

Android phone numbers have been growing worldwide at a faster pace than the iPhone, but that’s only because most of those Android “smartphones” are being sold in countries where sales are mostly the cheap, low-end variety (they are not Galaxy S 4’s and HTC One’s, etc.). Low end Android phone sales are selling much faster than Apple’s low-end phones because (drum roll please 😉 Apple doesn’t make low end phones… yet!

In contrast, in the USA most smartphones sold are the high-end type, and in that market in which the iPhone competes, the iPhone is gaining share.

Low end phone sales also mean minimal profits (if any). This is why last quarter, despite the iPhone’s worldwide sales being much less than all of the Android phones sold put together, Apple still made the majority of the worldwide profits (53%). Samsung came in second due to its mostly low-end phone sales (50%).

Notice that both total to 103%! That’s because the profits (actually losses) of all of the other Smartphone manufacturers combined totaled -3% (That is MINUS 3%).

So far, Samsung has had the low-end smartphone field to itself. It’s easy to win in a market where you have no competing products from Apple. But if the rumors are true, Apple will be introducing a low-end phone very soon, and Apple not being in the game to lose money, has likely found a way to make low-end phones that will bring in a reasonable profit.

Brand won’t do much in the long run, actual user experience is what matters (ask Blackberry or Nokia, etc), which is why Apple tends to offer lower cost products as opposed to cheap products. Apple only succeeds when they sell quality products for a profit. Their business model is actually pretty simple at its core.

Kenton Douglas

The quality and user experience of all products will improve. Functionally there’s not a huge difference between iOS, Android, or Windows phone. If there are gaps they will disappear and it’ll come back to price and/or the ability to offer genuine innovation. I can’t see where else there is to go with a smartphone apart from making them more contextual aware, and improving natural language interaction (via machine learning, combined with big data) and in that regard Google have the lead.

Space Gorilla

How nice for Google. How does any of this change the reality that Apple continues to sell more and more iPhones and iPads every year? And why do so many people have trouble digesting that very basic fact?

Kenton Douglas

I don’t think many people (who can count) have trouble with that fact. If there are people examining Apples position it’s because the rest of the industry is also selling more and more devices every year – but at a faster rate, ie. Apple are selling at below the market (growth) rate – hence a reduced market share. But, as you’ve articulated several times, Apple have their business model that works very well for them. So, good luck to Apple.

Space Gorilla

So, we’ve established that Apple is indeed growing unit sales of both iPhone and iPad, and continues to do so through 2013. That would seem positive, to sell more and more of the products you create. We have also established that Apple has very good margins, quibble all you like about the ups and downs of their margins but in no reality are Apple’s margins poor or in danger of becoming poor. And we’ve established that the smartphone market is also growing, even faster than Apple. That would also seem positive since a larger market is good for all players, Apple included (especially given the positive data for Apple re: second smartphone purchases).

Now, the bad news for Apple is that they are not selling their products fast enough? That’s a nice problem to have. It’s a negative only if you believe in the Church of Market Share, which as a business owner, I never have. I believe in segmentation, in having a target and aiming at it. Apple does that very well.

http://www.asymco.com Horace Dediu

Android shipped phones?

Stephen Olson

Oh wow 6.3” that’s so huge. Glad to hear you’re making jaws drop when you pull that big boy out!

Chris Lickorish

To be honest it’s a bit too big for daily use and I will be getting a s4 in red when that’s released here in the UK in Oct. The mega can be used for weekend’s away (I’m retired and love to travel) when I can relax watching “Family Guy”, playing music and Candy Crush.

SockRolid

Smartphone newbies who bought cheap dispose-a-droids are moving up to iPhone. Apple apparently does better with experienced smartphone shoppers than with newbie shoppers. Chaka10 has already mentioned the salient quote from AllThingsD: “… under one-third of first-time owners buy an iPhone…”

And, if the rumors are true, Apple could soon release a lower-cost iPhone “5C” to replace the 1-year old and 2-year old iPhones, possibly at the same price points. There won’t be anywhere to hide for Samsung and whatever Android hardware partners are still around. No more price umbrella.

Baby

you’ve got a problem, dude

narg

As far as first time experience, WIndows Phone actually does the best for first time experience. But that won’t help their lack of an eco-system much. Time will tell…

twilightmoon

That could be true if they had a viable software ecosystem but they do not. First timers download software just like long time users.

randomness9090

It’s also the fact that iPhone is finally available on all major carriers in the US, and older models are available to handle the low end of the market. For example, there were no low-end models available on Verizon until the second-generation CDMA-capable model was produced by Apple.

The iPhone always did well on AT&T. It is now the top-selling phone on Verizon as well, and a good seller at Sprint and T-Mobile.

Kenton Douglas

Any idea as to what percentage of Iphone sales are made up of “lower cost” devices? That would be a very intriguing stat’.

obarthelemy

I don’t know for the US. For France, which is 70%unsubsidized, it is 30% for the <$200 handsets. Note that there are OK models in that range (Wiko Cink Peax, Samsung Galaxy Trend…)

This comment adds nothing to the discussion. If you think Horace’s figures are biased or incorrect or incomplete in some way link to, or at least state, what you think the correct figures are.

gbonzo

“Indeed, iPhone gained more users than Android for the last 6 out of 8 months.”

Why eight?

chrishh

Because iPhone took more users than Android 8 months ago, and Android had more gain in two of the months that have passed since then?

twilightmoon

Trolls are not welcome here. You may leave.

obarthelemy

There’s something true though. Looking back at the articles, this blog has been 100% positive about Apple, and 100% negative about Android, even while marketshares went 15:80 in smartphones, reversed to 40:60 in tablets (actually, more than reversed) and the profits significantly re-balanced.
To me, that spells bias. Conscious or not, but bias. It might be worthwhile to point it out.

Jerry

obarthelemy is the PROOF that trolls ARE welcome here

http://www.asymco.com Horace Dediu

The facts are free. My opinion, on the other hand, is very expensive. If you sense bias then I’m slipping and giving away too much.

rebalance

Did profits rebalance? They still seems quite skewed.

Space Gorilla

I think it’s more a case of reality having a pro-Apple bias.

obarthelemy

Shure.

Jessica Darko

Show me audited SEC filings backing up that graph, or admit it’s just made up numbers.

Jessica Darko

You beat me to it. I hadn’t seen your comment when i made mine.

http://www.noisetech-software.com/Home.html Steven Noyes

And yet actual usage stats are fairly constant.

obarthelemy

Yep. if only the goal were to sell web usage stats, not devices…

Space Gorilla

For your convenience, iPhone sales by fiscal year:

2007: 1.4 million sold
2008: 11.6 million sold
2009: 21 million sold
2010: 40 million sold
2011: 72 million sold
2012: 125 million sold

With 2013 on track for yet another increase in total iPhones sold. So if the goal is to sell more iPhones each year, Apple is doing just fine.

obarthelemy

(sorry, I’m so used to Android figures, I briefly though those were quarterly sales).

Jessica Darko

Show me a single android device that has sold more than 5M units…. but when you do, you better provide audited filings with the SEC to back it up, like Apple provides every quarter.

If you can’t do that, all you have are made up numbers from android proponents.

Here’s the truth– android sales are pitiful, as the web usage stats show. That’s why companies won’t report their actual sales, and when forced to in court like samsung was, they were pitiful.

Jessica Darko

Reality has a pro-apple bias. You can spew all the made up “marketshare” numbers you want, but that ain’t reality.

is there missing data in android growth in May 2013 for ‘Mobile Platform Net user gains’? it doesnt seem to show?

loss

Read the opening paragraphs again, Android lost a small number of users, according to the data, but so small it isn’t visible.

cadence tan

right thanks

Jacob Willliams

The real trouble for Apple is that I used to be all about Apple until I got the Galaxy Note 2 two months ago.

If Apple doesn’t make a 5in iPhone they will lose. Fact. Sad, and true.

Time to think different apple. No one will be surprised or wowed if an iphone5s comes out with the same form.

And that’s why apple is bleeding users to samsung daily. The Note line was a risk. And risks pay off.

http://www.noisetech-software.com/Home.html Steven Noyes

The overwhelming vast majority of smartphones sold are 4″ screens and smaller.

Jacob Willliams

I’d love to see some data that shows that people go back to 4″ once they exceed it.

You will like a bigger screen when apple comes out with one. I know this as a fact because you already have. Everyone rejoiced when apple came out with the bigger iPhone5. I look forward to the same reaction with the iPhone 5″.

What exactly are you defending anyway? The status quo?

Space Gorilla is showing me a growth in units sold. How does that figure into my decision that my Note 2 is a better product than my iPhone 5?

Let me shed some light on what you’re perceiving as a valid argument.

The original iPhone was a better product than blackberrys.

RIM had record breaking revenue in 2007. They sold double the amount of units in some months over the prior years. They had a 76.5% increase in second quarter sales.

Alas, I was the fool that said Blackberry’s outlook looked bad back in February 2008. How silly I was.

Please explain why units sold will make my experience with iPhone better.

To be honest, I don’t care about Samsung. Apple is a better run company. But Samsung has a better product right now. That’s what matters to me. I don’t own stock in these companies. I own their products.

Space Gorilla

Unit sales have nothing to do with whether you personally like one product over another. But it does put to rest the very silly notion that Apple is losing customers. As for Blackberry, here are their global user numbers from 2008 forward:

2008: 14 million
2009: 25 million
2010: 41 million
2011: 70 million
2012: 77 million

And I think at the end of 2012 it was right around 80 million users. So Blackberry would appear to still be growing its user base while at the same time losing market share. Anyone have data to the contrary? Those numbers are from Blackberry of course.

Jacob Willliams

This proves you can sell more units than the prior year even when you have an inferior product.

You rest my case.

Space Gorilla

Why do you frame it as inferior vs superior? Different consumers have different needs. Why on earth are so many people angry about Apple’s success? It’s as if the fact that Apple continues to sell more iPhones every year offends you in some way.

So for you a Blackberry or an iPhone is inferior. Great. What does that prove? Garbage like “You rest my case” doesn’t help your argument either. Make an argument, don’t play word games like a child.

Jacob Willliams

Space Gorilla,

All apple needs to do is make a phone that has at least a 5″ display with pressure sensitivity of… IDK… 2000p?

The Note 2 has a 5.5″ display with 1024 points of pressure.

Space Gorilla

The era of the nerd/spec is over. Computing devices are shifting to face consumers. Basing any kind of analysis on the belief that consumers care or know about specs is faulty. Apple is succeeding *because* they have abstracted the computer, this approach is not the disadvantage you think it is. You’re making the mistake of assuming the majority of consumers approach the market in the way that you do. Honestly, how many consumers do you think understand anything about pressure sensitivity? That is not a factor that is influencing buying decisions in any meaningful way. If you have data that shows a significant percentage of consumers are basing smartphone purchases on this spec, please share it.

Jacob Willliams

Yes, I do have data. A drop from $613 to $580 in the average selling price of the iPhone.
This drop oddly coincides with the same time frame that I found another phone that’s better for me than the iPhone.
Another event happened during this time as well. Apple started a buyback program to keep people on the iPhone. Interesting.
Companies react and do things according to data that you, me, and Asymco don’t have.
Too many analysts listen to what people say and not what they do.
I must of missed the episode were they talked about the reason for apple starting such a program.

You know what I do when my businesses slow down? I talk about the issues. I focus on what we can do better. I don’t sit back and talk about how awesome all my good locations are doing.

BTW. If I’m truly a shill. Then I’m a shill for Asymco. I’m sure all this returning traffic and words from these debates are doing wonders for his seo. So you’re welcome Horace.

Ain’t nothing to talk about if everyone agrees.

KirkBurgess

The iPhone ASP drops every single time as the product ages, and then jumps back up upon release of a new model.

davel

These are nice numbers and for the fiscal/calendar year in question Apple’s phone sales were quite good.

However for the current year they are good but on a relative basis not so.

They are losing share in the market because the market is growing at x% and they are growing at x-n%

All the while their revenues are not growing as in the years you quote and their margins are shrinking.

I attribute a lot of this to macro economic factors but just as Mr. Williams is indicating above the hardware/software experience of various Samsung products is ‘good enough’ as our host likes to say. Also do you think Apple would spend so much time and energy sueing Samsung if it wasn’t threatened? Why has Samsung gone from being not a player in smartphones to selling more smartphones than anyone else and owning the Android market if they do not sell phones that customers want all in a few years?

threaten

It’s been suing people from before your signs of being “threatened” existed.

chrishh

And they were sued before they even started showing signs of suing, themselves.

Your point?

http://www.noisetech-software.com/Home.html Steven Noyes

I have moved from 4.3″ down and loved it. 4.3″ is too big for day to day use. Much like the trend to gigantanortisours SUVs a few years back.

Jacob Willliams

Steven, that’s actually interesting. What phone were you on before? The HTC WP8X or Rezound. Or one of the the several Sony Experia’s.

In all cases I don’t blame you for running back.

Screen sizes aren’t the most important thing. I said earlier I took an honest crack at the GS2. I thought, I’m going to really push through it this time. That lasted about two months before returning to my iPhone4. That’s the longest I’d gone with any phone other than the iPhone.

My concern for Apple is that I didn’t go back this time.

Space Gorilla

Customer retention and sales data tell us you need not be concerned. Apple is not losing customers.

http://www.noisetech-software.com/Home.html Steven Noyes

I have used a Droid X for a several weeks.

Chaka10

As I previously wrote, I think you make some interesting and important points about demand for a larger screen format. For me however, I persinally cannot abide by Samsung’s business practices, as a matter of principal, period. I don’t seek to impose this on others, but I do wonder from time to time if thoughtful consumers have a care, or even bother to think about, those considerations.

templewolf

Although there is a market for a 5 in phone, I don’t think you can generalize and say that its better. For playing music and sending text messages I would argue the smaller the better, for surfing the web and watching videos, the bigger the better. Also the reason why Samsung is selling huge phones is because Apple is not. This is a company that sells every form factor except a premium 3.5-4 inch phone, it’s not a coincidence.

Jacob Willliams

You’re right. Samsung doesn’t sell a 4″ phone. Very good point.

And I wouldn’t argue that my android software is better than IOS. So it’s clear to me that Apple should make a bigger phone. Closing any holes in the market.

Space Gorilla

Hmm, iPhone sales by fiscal year:

2007: 1.4 million sold
2008: 11.6 million sold
2009: 21 million sold
2010: 40 million sold
2011: 72 million sold
2012: 125 million sold

And 2013 conservative projections are a lot more than 125 million. This idea that Apple is losing customers/bleeding users is a myth.

Jessica Darko

“I used to be all about Apple until I got the Galaxy Note 2 two months ago.”

Yeah, sure. Apple haters have been using variations of this line constantly for going on 2 decades now. Yet Apple continues to grow it’s market share… so why should we believe you?

Frankly, if this were true, it would reflect pretty poorly on you. Like claiming you’ve given up Mercedes after test driving a Yugo.

Jacob Willliams

You’re right Jessica.

I didn’t work for AT&T convincing thousands of users to switch to the iPhone back in 2008.

I didn’t start a business that repairs hundreds of smartphones a day with three locations and knows how these products are built down to every screw. Training three dozen employees how to work on said devices. That also buys hundreds of phones which has allowed me to try them all.

I didn’t start an architectural and graphic design firm that grew 300% in the last year.

I hate Apple, know nothing about business, and don’t know the first thing about design.

I’m just a paid shill for Samsung. Because people like me don’t exist.

Space Gorilla

I don’t see how your personal accomplishments are relevant to your incorrect statement that Apple is “bleeding users”. Sales data tells a different story.

Jacob Willliams

My accomplishments contradict Jessica’s vanilla response that I’m sure she attributes to anyone that wants to discuss anything that Apple should do besides what they’re already doing. I’m not a shill. No personal offense Jessica, but a lot of people loved working on OpenDoc. The majority of the Apple team didn’t want Steve to kill that project. Don’t be that person that believes everything Apple does or is doing is the best most greatest product or direction.

Space Gorilla

Again, how is any of this relevant to you making incorrect statements in the face of actual sales data?

TheBasicMind

Problem with your reasoning is it’s simply wrong. Apple aren’t bleeding customers to Samsung. Samsung are bleeding customers to Apple. You are being confused by the headline market share figure where Samsung are getting a greater share of customers who have never owned a smartphone with a larger share coming from lower income groups. Amongst customers who already own a smartphone, the dynamic is away from Samsung and towards Apple. Did you read the article (or read any previous Asymco articles on this subject)?

Jacob Willliams

Yes. I read all the articles and listen to all the shows.

Did you read my comments?

Until now, every smartphone I’ve used has not measured up to the iPhone.

That’s why I say I’m worried about apple.

I’m also worried because everyone is obsessed with this iWatch. Why are we even talking about an iWatch if things are looking good?

Wearable computing has similar issues that voice command does. Integration into lifestyle and habits.

I don’t want to take something off when I shower or every time I’m working on the computer.

Again, too many people think adoption is less important than the technology.

TheBasicMind

OK, I take it you mean there is subset of the net flow between Samsung and Apple that could be retained if they did a note-sized product. The thing for Apple is to avoid complicating the product line. Companies with a large range of products lose focus. They no longer make each product with love. As the market matures it’s natural that Apple will start to “mine the seam” more and look to produce products satisfying a niche a little more. Personally I don’t think that will mean they will produce a Galaxy note sized product. From the rumours I have heard, they will be going the other way and may produce a larger sized tablet which will be more attractive for content producers. We shall see.

I believe adoption IS less important than the technology. Apple are over the “hump” in terms of sufficient adoption and we are no longer in the 1990’s where the OS and supported formats locked you in or out of being able to perform x, y or z tasks (at least not within the usage space of tablets).

templewolf

A 5 inch Iphone would be a terrible move from a PR perspective, as it would be viewed as them copying Samsung. If they enter that category it would be with something different, like a expandable/collapsible phone.

Chaka10

Don’t know about Apple losing users to Samsung daily, vs other way around — I haven’t seen hard data on that, except in USA iPhone seems to have down well even in the S4 launch quarter. But you raise some interesting points about the Note II. I don’t know that Apple is religious about screen size, but I do believe them that it’s about trade offs.

Space Gorilla

Yes, if Apple feels there is a large enough segment, and when they can deliver the required battery life, then we may see a larger screen iPhone. How quickly we forget why Android devices had larger screens to begin with.

Chris Lickorish

Absolutely agree. I remember the Note being criticised here in the UK, but then I noticed it being used, often by women who could slip it into their bag after use.

If this all is true, then I would argue that it started with the iPhone 5 coming to the stores but not because of the iPhone 5! It was the iPhone 4s and 4 which benefited the most from the price lowering and price has a great impact on Apple products and Apple customers, too. If original iPhone had been sold for 800$ not being subsided by AT&T (they were betting on iPhone more than Apple) we would still see a lot of Nokia people and Symbian alive today. My (this is highly subjective, take it with a grain of whatever) very first impression on the original iPhone was that it was so affordable yet so innovative, so I ditched Nokia the same very second. Price had a great impact on me even if I consider myself a geek. On “average customers” price has even more influence, so this is a start of my “theory”.

This research might also indicate that productivity on the smartphone as a category is peaking and that specs doesn’t mean all that much from this point. The same works for Android as the two OSes are inclining to each other. Apple is adopting functions from Android, increasing iPhone screen size (and decreasing iPad screen size), and, as lot of people expect, is building a cheap product variant. On the other side, Android is getting higher stability (since JB it works just as stable and smooth as iPhone) and less fragmentation by pushing stock Android harder (Nexus lineup, S4, HTC One, Motorola) and doing more on hardware/software optimization (Moto’s X8). If Samsung did the same and moved its unique Touch Wiz options (some are really cool and some are just gimmicky) to be just additional applications (i.e. like Google did with Google Keyboard) then it would be a completely new power for Android community.

So, I say, it is not that the iPhone 5 is an ultimate upgrade considering its direct counterparts of high-end Android based phones (lets be serious, we talk about S4, Note II, HTC One, Experia Z,…) but the iPhone 4’s iOS is a cheap upgrade from 2.3 Gingerbread for SOME average users. Why they bought cheap Android device in the first place is because they are average users who will never be seeking for high-end experience. You have such people, not interested in tech just picking up the mainstream. They were just seeking for ANY smartphone experience but under their conditions (free choice of carrier, data deals and so on) which Apple did not provide at the moment. They are not fans of anybody, they are not loyal to anyone. You don’t have to expect them switching to high-end devices ever, no, you can only offer them more affordable average devices and more choice. This churn will not last long, as lot of these users bought their 2.3 crap devices before SG SII and SIII were available (May 2011, May 2012), so this is the period where their 2 years contracts are expiring. SII and SIII users are more happy with their JB 4.1 and 4.2 and you can’t just get them switched to iOS that easily, if possible at all.

Just to illustrate the difference between those two I will use my own example. I had both cheap and high-end 2.3 Gingerbread devices and got the high-end one (Note) updated to JB 4.1. The cheap one (7 inch Prestigio tablet) made me curse myself for hesitating to buy an iPad (OK, there were some other, objective reasons for not doing so), but SG Note makes me proud of not buying an iPhone 4S (well, AND iPad at the same time) as I first intended just befor coming to Japan. May I add that the iPhone 4S was dirt cheap in comparison (almost double) at that moment thanks to the fat subsidies and crap 3G only service of their provider here in Japan. You would understand my choice if I just say LTE support, S-pen, double the screen size, battery life, camera quality, and much better carrier… There were some issues and lot of frustration during first 6 months while I was using Android 2.3 (overheating, occasional force closes, and need to restart the thing) which all disappeared once I got 4.0 ICS. With the Prestigio tablet was even worse, driving me crazy, so it is collecting dust now. Now I run official 4.1.2 and there is that strange thing that I just cannot that easily think off any function that I essentially lack. Just a multi-window option (real real multitasking) that my wife has on Note II. I just like listening to Youtube playlists while surfing or doing anything else and I still can’t do that. This is the only thing I miss and (correct me if I am wrong) iPhone does not offer that as well.

I would really like to see a research on Android users loyalty but in function of what version of Android they run. If I am right, then Android 2.3 users will show much much much less loyalty then 4.0, 4.1, 4.2, and 4.3 users, respectively. As these would be just a part of 2.3 users I would say that churn which seems to be possible by this data and happening last few months will last only until the 2.3 users are no more.

From September there will be completely different and more intensive battle, with Apple going into cheaper less profitable segment, and Moto X going into average users segment with affordable, highly fluid and responsive but not high-end phone by the specs. As for high end segment I predict dominance of Android based phones and phablets being somewhat bullish cannibalizing both iPhone 5 and S4, HTC One sale numbers. This is of course in case that Apple presents 5S and 5C, and not 6 and lower priced 5.

Hi Horace, Congratulations on your ongoing excellent work! Especially look forward to your Critical Path discussions. With all due respect to your fabulous website, would not the interests of constructive discourse be better served if you modified your “open door” policy and denied access to those commentators who are only here to be disruptive and seek negative attention (the Trolls).
The comments section used to be so valuable. Now it has become so tedious, filled with petty arguments started by those with no genuine intellectual curiosity or desire to learn. Often, I can’t even get through them. And when I do, the nuggets of insight gleened don’t seem to justify the time and frustration.
Please accept this comment in the constructive spirit intended. All the Best, Bert

http://www.asymco.com Horace Dediu

I have a strict policy on comments. There is zero tolerance for disrespectful behavior. That behavior has been successfully avoided but there are times when tribalism takes root and I need to decide how to deal with it. It is a difficult thing to police.

Expect it will be a long time, one hour all dilates all tired, that each will only serve for the following Windows Phone, leveraging its sales, users are seeking new alternatives now so many different and without errors or bugs that get to be “standard” android .

Or put another way, Horace, by basing your analysis on the BS numbers from android propaganda, rather than actual sales, you’re giving credibility to the douche reporters who want to trumped the “android is winning” propaganda.

In short, Asymco has become a pro-android propaganda site.

It’s time to analyze Apple, and exclude Android, or any other “platform” that doesn’t give real sales numbers.